Emerging Asia’s wealth to overtake US by 2015

A shopper browses handbags inside a Furla SpA store in Hong Kong, China. Furla, the closely held Italian handbag maker, predicts its China sales will outpace the company's this year as a rising middle class and government austerity drive benefit entry-level luxury goods.

Despite being home to some of the poorest people in the world, financial wealth in emerging Asia is set to outpace that of the U.S. by 2015, HSBC analysts have found.

The investment bank said that while it's important to remember that some countries in the region suffer the worst cases of poverty, the rise of Asian wealth which powers luxury sales, for example, has been stupendous.

As a result, Asia, including Japan, has more than tripled its financial wealth since 2001 to just over $80 trillion, HSBC analysts found.

"Assuming that current trends persist, emerging Asia should surpass the United States by 2015… Leaving out China as well, the region would take (just) another ten years to exceed U.S. financial wealth," said Frederic Neumann, MD & co-head of Asian economics research at HSBC.

The HSBC analysts assessed individual countries' financial wealth, including money held by governments, by adding together the value of bonds and stocks to broad money supply, before subtracting net foreign holdings and calculating each country's wealth in U.S. dollars.

They acknowledged it was difficult to analyze precisely how rich the region has become due to a lack of consistent data on the share of households in total financial wealth and in terms of the value of real assets like real estate.

The report found that while Japan used to dominate Asia in terms of financial wealth, China has been quickly catching up, snatching Japan's title as the world's number two economy in gross domestic product terms back in 2010.

But in terms of financial wealth, HSBC estimates China will overtake Japan this year, rising from 13 percent of Asia's total financial wealth in 2012, to 34 percent in 2013. Furthermore, the economy could add some $25 trillion by 2018, HSBC said, equivalent to the entire value of the U.S. residential real estate stock at its peak in the mid-2000s, comfortably exceeding Japan's $8 trillion increase and the U.S.'s $16 trillion over the same period.

HSBC found that Japan, which had greater financial wealth than the U.S. in the 1980s, saw its share of Asia's total financial wealth decrease from 63 percent in 2012 to 39 percent in 2013, a decline the economists put down to the rapid depreciation of the yen.

ASEAN's share of financial wealth, meanwhile, rose to 8 in 2013 from 5 percent in 2012, while Korea and Taiwan dropped back slightly. India could have had a strong year, but the dramatic slide in its currency eroded any improvement.

HSBC's analysts added the caveat however that for emerging Asia to overtake the U.S., current trends would need to persist.

"The road ahead is littered with potholes, and it remains to be seen whether the region can navigate these without a major economic accident. We think so, but history is sobering," said Neumann.

"Still, should current rates of economic and financial growth hold, emerging Asia would own a bigger pile of financial assets than the United States by next year. That's up from 25 percent in 2000. No surprise, therefore, that luxury shopping malls have sprung up everywhere," he added.

One of the major reasons why Asia is eclipsing the U.S., the analysts found, was because many Americans still hold a greater share of their assets in real estate.

One striking finding, the analysts said, was that the value of residential real estate in China overtook Japan in 2012.